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Calculate the payback period for the proposed equipment

The Seago Company is planning to purchase $436,400 of equipment with an estimated seven-year life and no estimated salvage value. The company has projected the following annual cash flows for the investment.

Year Projected Cash Flows

1 $177,000

2 147,000

3 104,000

4 50,400

5 50,400

6 42,000

7 42,000

(a) Calculate the payback period for the proposed equipment purchase. Assume that all cash flows occur evenly throughout the year. How many years and how many months?

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Accounting Basics: Calculate the payback period for the proposed equipment

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